Recap 2-12-13: Some Charts to Watch


There’s not a ton going on in rates and equity index markets at the moment, so the recent movement in the Yen and the G7 statement is naturally directing attention in the FX arena. Here is a quick look at some crosses that seem interesting at the moment.

USDJPY has been a veritable chopfest the past week, with gappy price action around policy maker comments that were misquoted, mistranslanted, misunderstood, or otherwise. The longer term trend is clearly still up, but the rising volatility suggests underlying instability. The BoJ meeting is not expected to be a market mover, but the new BoJ governor is expected to be announced soon, which will likely be a substantial market driver. Only one thing seems assured – volatility is unlikely to decline.

EURGBP has been very volatile the past few weeks as a result of a combination of LTRO repayments driving up EUR rates, Carney’s testimony in the UK (where he discussed NGDP targeting), and general risk on/off. IMO, all these factors have been over exaggerated with respect to this cross, with a helping hand from trend followers and seasonality effects. Longer term, the cross is at the top of a multi-year channel. With the cross appearing rich vs short term regressions, some downside seems likely from here.

USDCAD also looks interesting short term. It appears to have twice rejected longer term resistance at 1.007 the past few weeks, and seems to be in the process of forming a short term double top. With the cross also appearing rich vs short term regressions, a downside punt here may be worthwhile.

Finally, it’s important to note that the US 10yr yield appears to be getting ready for its next move higher, after consolidating for the past couple weeks. A breech of the 2.06% level could have impacts across the macro landscape.


  • The initial G7 statement was unsurprising, with no reference to FX beyond the commitment not to target exchange rates. BUT, then a G7 official was reported as saying that the statement was misinterpreted, and DID signal concern about excess moves in the Yen.
  • Reuters reported that banks will repay 125bn Euros on February 27th. This is the second tranche of three-year LTRO loans from the ECB. (For reference if the same percentage is repaid as LTRO1, the amount would be 148bn)
  • the Pentagon is preparing for billions worth of new spending cuts, holding out little hope for a deal to avert the sequester – WSJ

Upcoming Data:

  • Tue: UK CPI, US State of the Union
  • Wed: BoE Inflation Report, US Retail Sales, Oil Inventories, Japan GDP
  • Thu: BoJ, EU 4Q GDP, US Jobless Claims
  • Fri: G20, US Existing Home Sales